Growing Net Worth In Retirement

[Lsbcal]

Audrey, I'm not quite sure what your emotions are regarding the ups and downs but I know mine. I look back at some periods of higher portfolio balances (in real terms) and have to remind myself not to judge this stuff in terms of my accumulation days. Now I'm spending more and hopefully enjoying the experiences.

There is no way to put a monetary value on the spending experiences whereas it's simple arithmetic to see the portfolio balance. I'm not going to make the mistake of over emphasizing the later.

Still I'm hopeful of making better investment decisions going forward. Maybe I can have it both ways. Hope springs eternal.

 

[robnplunder]

You are all giving me confidence in my plan to retire soon.

With DOW breaking new record, do you think gaining in NW will continue, stay flat, or go down? Bull market will have to end sometime.

 

[W2R]

You are all giving me confidence in my plan to retire soon.

With DOW breaking new record, do you think gaining in NW will continue, stay flat, or go down? Bull market will have to end sometime.

That's right! The bull market will end sometime, though I don't know when - - a month from now? a year? five years? It's hard to predict in advance without a crystal ball.

When it ends, if we have a significant crash, you will hear much wailing and chest beating from some, and some others will declare with great melodrama that they are pulling everything out of the market. Calmer folks will say that they are tightening their belt, keeping their investments pretty much the same, and holding on for the roller coaster ride ahead.

After the 2008-2009 crash, I guess IIRC that by 2010 a few people began to happily announce a full recovery of their net worth. As the months passed, more and more joined them.

 

[robnplunder]

After the 2008-2009 crash, I guess that by 2010 a few people began to happily announce a full recovery of their net worth. As the months passed, more and more joined them.

I was wondering about what happened to folks in this forum through the recession and recovery. Good to know that many have recovered from the recession.

I had number of roller coaster years through late 1990s, dot.boom crash, recovery, 2008 recession, and another recovery. I was a millionaire one year, felt like broke next year, millionaire again, felt like broke again, ..., it certainly toughened me up but was torture while going through the up and downs.

 

[W2R]

I was wondering about what happened to folks in this forum through the recession and recovery. Good to know that many have recovered from the recession.

I had number of roller coaster years through late 1990s, dot.boom crash, recovery, 2008 recession, and another recovery. I was a millionaire one year, felt like broke next year, millionaire again, felt like broke again, ..., it certainly toughened me up but was torture while going through the up and downs.

That's for sure! One thing about the forum during the 2008-2009 crash... we all had company while going through this, because we could post about it to others on the forum.

 

[pb4uski]

Another Y2K retiree here. Well, 2nd half 1999, but I do track my NW compared to end of year 1999/Jan 1 2000.

I don't have the "real" numbers during the 2000s, but my NW peaked in Oct 2007. It was 55% above the initial value nominal. By Feb 2009, it dropped 40% from that peak value, and was even below the initial value by 6%. So you know that all was even worse in real terms.

I started to tracking cumulative inflation and my NW in real terms in 2011.

By the end of 2011, my NW was still -10% in real terms from the initial value. (That's up 24% nominally). It was down slightly from end of 2010, actually, but I don't have the specific numbers handy.

By March of 2012, I finally crossed my Oct 2007 peak number in nominal terms. But I was still behind by about 1% real compared to my initial value.

At the end of 2012, my NW had just broken even in real terms. Up 36.7% nominal, but cumulative inflation over that period was 36.4% - so very close. Still - considering spending and taxes over 12 years, I was very pleased.

By the end of last month (Nov 2013), my NW was running ahead of inflation by 15.5%. Up 54% in nominal terms.

So 13 years later, do you think your NW is more or less than what you expected it to be 13 years into retirement?

 

[Danmar]

Anyone whose portfolio has not grown after withdrawals over the past five years, might do well to reconsider their withdrawal rate plan...

Totally agree. These investment results are not sustainable. Retired fall of 2006 and cash portfolio up a nominal 42% with only spending divs.

 

[Danmar]

My objective is to grow our spending as much as possible consistent with keeping a secure portfolio for the future. It is not just to watch our net worth grow.

As others have noted, it is hard to get the balance just right.

agree. I don't see any reason why we couldn't spend a fair amount more if the portfolio cooperated.

 

[MichaelB]

Still having two ugly bear markets at the first 8 years of your retirement is not recommended.

Understatement of the millennium.

Another Y2K retiree here. There have been ups and downs. Our portfolio is higher in nominal terms, lower in real terms, also lower than where I thought it would be. If I were to adjust for college expenses and some real estate that might be different, but then again, maybe not, and it's not really a big deal. Over this period our withdrawal has averaged at least 4%, which is where it is right now. I am more confident today that our portfolio will survive than I was back in 12/99.

Back then I was totally focused on return. For me, wrong. Now what matters (for me) is reducing risk. Our portfolio should last, and I am convinced the greatest source of risk, by an order of magnitude, is not market valuations but self-inflicted.

 

[audreyh1]

So 13 years later, do you think your NW is more or less than what you expected it to be 13 years into retirement?

Overall I would say I am very pleased, especially considering some of the expenses we have indulged in over the years.

I will be quite pleased just to have NW keep up with inflation, so anything beyond that is just icing on the cake.

Our expenses have not in any way risen with inflation, so it really "feels" more like our NW is up 50% since retiring in our personal "real" terms, and that feels delightful!

Knock on wood!!! Multiple times!!!

 

[Lsbcal]

...
By the end of last month (Nov 2013), my NW was running ahead of inflation by 15.5%. Up 54% in nominal terms.

You've done well in a "crushed W" market. That's the sort of line form you'd see if plotting the SP500 inflation adjusted returns for the last 13 years.

 

[Alan]

Our NW has also increased since ER in 2010 while withdrawing 2 to 4% / year. I've been doing fairly aggressive ROTH conversions and 14% of NW is now in ROTH funds.

 

[explanade]

Don't most calculators and simulations show the portfolio balance growing for awhile, even without record market growth, since the withdrawal rate is usually lower than the real growth rate that most people assume?

If the withdrawal rate is 3-4% but the assumed real return is 4-5% or higher it should go up?

Also I think a lot of people said that if they spent less than their annual withdrawal in a given year and/or the withdrawal was higher than anticipated because of high returns, they withdraw less in following year(s), as opposed to increasing spending.

 

[ERhoosier]

From purely FP/Monte Carlo scenario viewpoint, I would expect to see most FIRE's NW growing now with equity markets at all time highs. IMHO this is no reason to significantly increase spending but rather should be viewed as part of long term fluctuation in portfolio values.

 

[Animorph]

Don't most calculators and simulations show the portfolio balance growing for awhile, even without record market growth, since the withdrawal rate is usually lower than the real growth rate that most people assume?

If the withdrawal rate is 3-4% but the assumed real return is 4-5% or higher it should go up?

Also I think a lot of people said that if they spent less than their annual withdrawal in a given year and/or the withdrawal was higher than anticipated because of high returns, they withdraw less in following year(s), as opposed to increasing spending.

Have to include inflation if that's a standard 4% SWR withdrawal. And a little extra if you take the 4% out at the start of the year. For a 4% withdrawal you need 1/.96 = 1.0417 or 4.17% portfolio growth to replace the beginning of the year withdrawal. Then you need to match inflation on top of that, maybe something like 3% on average though we all differ on that. So maybe a 7.17% average growth each year to maintain the real value of your portfolio and keep the withdrawals to a constant percentage of the portfolio as they are increased for inflation. That's approaching the long term average S&P 500 gain, and may match the historical average gains for a portfolio with significant bonds. And then real world volatility of returns totally screws all of that up anyway.

 

[audreyh1]

BTW for people tracking real returns, here is a handy cumulative inflation calculator. InflationData.com's Cumulative Inflation Calculator

Start with the month prior to your period - for example for inflation since Jan 1, 2000, you start with Dec 1999.

 

[audreyh1]

You've done well in a "crushed W" market. That's the sort of line form you'd see if plotting the SP500 inflation adjusted returns for the last 13 years.

One day I'll go back and create that graph. Got other things to do first.

 

[Lsbcal]

One day I'll go back and create that graph. Got other things to do first.

I'll be posting a copy of my decades chart at the end of the year. It's basically the orange line + the blue line.

 

[CyclingInvestor]

Retired 7 years ago at 48, pulling out 3-4% each year as needed, have about 40% more than when I retired in an all-stock portfolio.

 

[Danmar]

Retired 7 years ago at 48, pulling out 3-4% each year as needed, have about 40% more than when I retired in an all-stock portfolio.

Very close to my experience over same period. Only cashed dividends which have grown by 75% over this period. Yields have increased quite a lot since I retired, from 2.9% range to 3.75% range.

 

[audreyh1]

Retired 7 years ago at 48, pulling out 3-4% each year as needed, have about 40% more than when I retired in an all-stock portfolio.

Inflation since end of 2006 - 15.5%, so you are way ahead in real terms too.